May Day Rally: Hormuz crisis could be more severe than 1970s oil shocks; government will do more to help if needed, says PM Wong

[SINGAPORE] Even after the Strait of Hormuz reopens, the ongoing energy crisis could prove more severe than the oil shocks of the 1970s, with conditions unlikely to return to normal anytime soon, Prime Minister Lawrence Wong warned on Friday (May 1).

Damaged ports, mine-clearing operations and the need to restore market confidence mean recovery will take months at minimum, he said in a nearly 50-minute speech at the annual May Day Rally.

“In fact, the pressures are likely to intensify. Supply disruptions will persist and may worsen in the months ahead.”

Globally, inflation will rise as the crunch spreads from energy to food and other essentials, and some economies may slip into recession, he told an audience of 1,600 people at Downtown East that included Cabinet ministers, union leaders and tripartite partners.

Singapore will not be spared, said the prime minister. Growth is expected to slow this year while inflation rises – putting “real pressure” on businesses, workers and households.

In April, the Monetary Authority of Singapore raised its 2026 forecasts for both core and headline inflation to a range of 1.5 to 2.5 per cent, up from 1 to 2 per cent previously, citing rising imported energy costs.

The official growth forecast for 2026’s gross domestic product remains at 2 to 4 per cent, but will be revised when full first-quarter figures are released later in May.

Referencing the oil shocks of the 1970s, PM Wong noted that the crisis had ushered in a period of “stagflation” – stagnant conditions and high unemployment combined with high inflation – which he described as “the worst of both worlds” for businesses and workers.

“Now, stagflation risks are rising again,” he added.

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The International Energy Agency has already warned that the current energy crisis could prove even more severe. “So we must brace ourselves and be prepared for a more difficult period ahead,” he said.

Position of strength

Despite the challenges, Singapore can look ahead with “quiet confidence” and it does not face this crisis from a “position of weakness”, said PM Wong.

The government made many of the hard choices early, from building up fiscal reserves to developing energy infrastructure such as Jurong Island and the underground Jurong Rock Caverns storage facilities. These have left Singapore in a stronger position to weather the storm.

He pointed out that this foundation has made Singapore a key node in global energy flows, with the world’s leading energy companies refining, storing and trading oil here and drawing on diverse supply networks when one source is disrupted.

It is an advantage built over decades, PM Wong said, “not by chance, but through deliberate choices, sustained efforts and discipline”.

At the same time, the government has moved quickly with an initial response to support businesses and workers through the crisis.

Last month, it rolled out a S$1 billion support package, including enhanced U-Save rebates, cash payouts, and bringing forward the disbursement of the next tranche of Community Development Council vouchers to June this year, from January 2027.

PM Wong acknowledged that Singaporeans may wonder whether support will still be available later, given that some measures have been brought forward.

He offered reassurance that the government will act should conditions worsen.

“We expect the situation to become more challenging over the course of the year,” he said. “And if that happens, we will do more to help.”

He urged companies to play their part as well, citing NTUC FairPrice’s decision to freeze prices on essential items as an example of how businesses could help ease the burden on Singaporeans.

“Because in times like this, Singaporeans can count on one thing: your government will act,” PM Wong said. “We will do so decisively, and we will stand with every Singaporean, every step of the way.”

The “Singapore Way”

Central to Singapore’s ability to respond is its tripartite model – the close relationship between government, unions and employers that has shaped Singapore’s economic resilience.

PM Wong noted that the labour movement has been a cornerstone of this partnership for 65 years, walking alongside workers through every major economic crisis.

Further, the system has held, he argued, because of the trust built within the tripartite partnership over decades, even when parties did not always agree.

Singapore has resisted the temptation to simply adopt solutions from elsewhere, said PM Wong, instead developing its own approaches suited to local conditions.

For instance, the government introduced the Progressive Wage Model rather than implementing a minimum wage. It also rolled out a Job Seeker Support scheme, which ties reskilling to unemployment support, rather than having unemployment benefits.

“This is the ‘Singapore Way’,” said PM Wong. “We don’t just talk, we act. We don’t just plan, we deliver results and together we take Singapore forward.”